customers and $125million annual revenue. In 2014 they raised a $60million in Series B equity financing on a valuation of $485million, and they built that shareholder value with only $12million in prior venture financing.
Entrepreneurs should love consumers’ embrace of subscriptions, too. If a pre-paid subscription business model works for a new product, revenue is far more predictable, and so is profit and loss. Business planning and investment planning is easier. This allows management to rebalance the company’s emphasis, focusing more on customer satisfaction to extend the recurring revenue ad infinitum. Your sales VP will be glad that he or she can worry more about customer satisfaction and low-cost, low-risk marketing, than to have to wonder all day, every day whether the company will meet the next quarter’s sales goals. That is a significant worry to unload!
$3-5billion in the next decade. This projection is correlated to consumer spending power, especially on-the-go professionals, who are happy to spend a little extra for good food at home, without the added pressure to cook. For a new vertical market to grow from virtually nothing to $3-5billion per year after ten years is not bad. Because the space is so new, the opportunity for new innovative market entrants will probably remain open for some time. Annually, consumers spend over $1trillion per year on restaurants and groceries. That is a lot of consumer spending that could be tapped by the right offering. How about a subscription lunch box for school kids? Or gourmet vegan?
Another lesson for entrepreneurs, and perhaps the most important, is that the range of internet-enabled subscription products accepted by consumers is widening. Subscription isn’t just for wine clubs anymore. The rapid rise of meal-kit companies and companies like the Dollar Shave Club is a sign of the burgeoning subscription economy. Three years ago the Dollar Shave Club started up in Los Angeles offering shaving blades for $1 per month. In 2014 annual revenue reached $65million, tripling revenue from their prior year. This year the company was valued at over $600million and received $75million in venture financing by Technology Crossover Ventures. Or take beauty products provider, BirchBox. In under four years, they accumulated 800,000 monthly customers and $125million annual revenue. In 2014 they raised a $60million in Series B equity financing on a valuation of $485million, and they built that shareholder value with only $12million in prior venture financing.
For a new vertical market to grow from virtually nothing to $3-5 billion over the next decade is not too bad.
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